Anti-money laundering regs in Canada could set example for U.S.

While as big an issue in the United States as debates about interchange fees and database security breaches, money-laundering is getting a lot of attention in Canada, and ATM operators are at the center of much of the debate.

During the ATM Industry Association's annual event in Canada in June, representatives from enforcement agencies as well as Interac, the country's payments association, said strong government oversight is expected for ATMs, where AML, or anti-money-laundering, laws are concerned.

"Interac is collecting locations of ABMs (ATMs), that track where they are. From there, cash-owner risk profiles will need to be created, and the deadline for that is Feb. 28, 2012. All of those profiles will be reviewed by Interac," said John Thomson, director for compliance and enforcement for Interac.

The worry: that organized crime could easily use ATMs to clean dirty cash. And the concern is not a new one — just one that's been hard to wrap a legislative brain around.

The background

In February 2008, Canada's Financial Action Task Force and Groupe d'action financiÃ¨re released their third evaluation report of anti-money laundering and efforts to fight terrorist financing in Canada. The two agencies released their first evaluation in 1997 and quickly initiated changes to address potential terrorist threats. After 1997, Canada enacted the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; and in 2007, the Canadian Financial Intelligence Unit (FINTRAC) was created.

Since its creation in November 2001, the Financial Transactions Reports Analysis Centre of Canada has worked to build relationships with government partners to fine-tune how money laundering and terrorist financing cases are disclosed to law enforcement authorities.

In May 2008, ATMIA, along with Interac, released a statement about the upcoming AML legislation. Though ATMIA said it would not make an official statement about how ATM deployers should comply with the legislation, it did highlight points from the Financial Action Task Force/Groupe d'action financiere report that independent ATM deployers should be aware of.

In its May 2008 statement, ATMIA said: "It was decided that the industry would not proactively comment, however we should be prepared to respond to media inquiries with two core messages: ATMIA and Interac are concerned about any abuse of the Interac network and have requirements in place that member payment processors must carry out to prevent fraud. Due diligence procedures (criminal background checks) should be conducted on all business partners that are contracted to perform any operation with respect to the Interac services."

To date, Interac is conducting audits, and the ATM sites are randomly chosen. Audits could cost an ATM deployer between CAD $200 and $2,000, depending on a number of factors, Thomson said.

"Some ISOs think they don't have to have contracts, but they do," he said. "To be excluded, you have to be a registered casino in Canada. And if you have a lottery license, then you would be considered low -risk, and therefore may not be audited."

That, however, is up to the auditor, since Interac's review process is determined by the auditor, not Interac, Thomson said.

Implications for the U.S.

Though no U.S. legislation is currently targeting money-laundering, the U.S. Patriot Act, for instance, is one act that impacts money-laundering. Many legal and policing agencies have concerns about terroriststs' ability to launder money through ATMs. Many recent industry guidelines, including due diligence guidelines passed down by Visa and MasterCard as well as the Operator Agreement Rules required by the networks a couple of years ago, touch on AML.

But as governmental oversight of the U.S. financial and credit industry continues to grow in scope and inclusiveness, many industry experts say they expect regulations similar to those in Canada to be coming the United States.